Families are using improvements in living standards to top up their savings rather than splash out on retail purchases.

According to a survey by the Centre for Economics and Business Research and Asda, Britons cut their spending by 0.3 per cent on an annual basis in the three months to the end of June, despite disposable incomes rising sharply by 14 per cent over the same period. Researchers said that the average family had a weekly disposable income of £245 in July, up from £241 in the previous month.

Asda and CEBR subtract inflation, essential bills and taxes from nominal incomes to generate an estimate of weekly spending power. Strong wages growth over the past two years and a general downward shift in inflation have fortified people’s living standards. Asda and the CEBR said that average weekly disposable income was now only 0.4 per cent off the peak reached in March 2021, before the cost of living crisis took hold.

The figures suggest that households are replenishing their savings rather than using improvements in spending power to increase their retail purchases. According to the Office for National Statistics, retail sales rose by only 0.5 per cent in July, below analysts’ forecasts but up from a contraction of 0.9 per cent in the previous month. Sales are 0.8 per cent lower compared with those before the pandemic.

“While household spending power has continued to grow, consumption has reduced within the same timeframe,” Sam Miley, managing economist and forecasting lead at the CEBR, said. “This reflects the trend of households spending less and instead diverting more of their disposable income towards savings.”

Household consumption represents a large share of overall GDP in Britain, meaning that economic growth could slow if spending remains subdued. The economy expanded by 0.6 per cent in the three months to the end of June, prompting some City analysts to raise their growth forecasts for 2024.

Income inequality remains sharp. Asda and the CEBR said that the average weekly disposable income of the richest people in society was nearly ten times greater than the typical household at £858.